Soros Fund Management LLC recently disclosed its portfolio updates for the first quarter of 2021, which ended on March 31.
Founded by George Soros (Trades, Portfolio) in 1969, Soros Fund Management is the primary advisor for the Quantum Group of Funds. After helping define the modern hedge fund, the firm converted to a family office in 2011, becoming closed to outside investors and avoiding new regulatory oversight. Soros' investing principles are based on his theory of "reflexivity," which holds that individual investor biases affect both market transactions and the economy. This results in chaotic financial markets and the mispricing of assets, providing value opportunities for the careful investor.
Based on its investing criteria, the firm's top stock buys for the quarter were Amazon.com Inc. (AMZN, Financial) and ViacomCBS Inc. (VIAC, Financial), while its biggest sells were Palantir Technologies Inc. (PLTR, Financial) and Liberty Broadband Corp. (LBRDK, Financial).
Amazon.com
The firm increased its investment in Amazon.com (AMZN, Financial) by 63,413 shares, or 1,136.23%, for a total of 68,994 shares. The trade had a 4.20% impact on the equity portfolio. During the quarter, shares traded for an average price of $3,171.97.
Amazon is a multinational e-commerce giant based in Seattle. Its vast network allows it to deliver many products to customers within one or two days, giving it tremendous pricing power. The company also has cloud computing, digital streaming, artificial intelligence and other tech operations.
On May 21, shares of Amazon traded around $3,203.08 for a market cap of $1.62 trillion and a price-earnings ratio of 60.93. According to the GuruFocus Value chart, the stock is fairly valued.
The company has a financial strength rating of 7 out of 10 and a profitability rating of 8 out of 10. The Piotroski F-Score of 6 out of 9 and Altman Z-Score of 6.39 indicate the financial situation is healthy. The three-year revenue growth rate is 28%, while the three-year Ebitda growth rate is 45.2%.
ViacomCBS
The firm established a new position worth 4,307,919 in ViacomCBS (VIAC, Financial), which had a 4.16% impact on the equity portfolio. Shares traded for an average price of $61.05 during the quarter.
Viacom was originally a 2006 spinoff from CBS, but the companies re-merged in late 2019. The New York City-based multinational mass media conglomerate owns mainly film and TV assets, including live sports, news, classic shows such as "Star Trek" and TV networks such as Nickelodeon.
On May 21, shares of ViacomCBS traded around $42.15 for a market cap of $27.42 billion and a price-earnings ratio of 9.31. According to the Peter Lynch chart, the stock is trading below both its intrinsic value and its median historical valuation.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 8 out of 10. While the interest coverage ratio is low at 4.85%, falling below 70% of industry peers, the Piotroski F-Score of 6 out of 9 indicates a stable financial situation. The return on invested capital recently fell below weighted average cost of capital once again, meaning the company is struggling to grow in a profitable way.
Palantir Technologies
The firm sold out of its 18,457,516-shares investment in Palantir Technologies (PLTR, Financial), impacting the equity portfolio by -9.37%. During the quarter, shares traded for an average price of $27.50.
Palantir is a data mining, analytics and software company based in Denver. It mainly makes its money from government contracts and has drawn criticism from human rights and privacy activists alike for its questionable business practices.
Soros Fund Management actually made the investment in the company in 2012, but the firm later regretted the decision and said the following in a statement around the time of Palantir's initial public offering:
"SFM made this investment [in Palantir] at a time when the negative social consequences of big data were less understood. SFM would not make an investment in Palantir today."
When Palantir went public on Sept. 30, 2020, SFM's prior investment was converted into common stock shares of the company. According to the statement, Soros had already sold all the shares he could and planned to continue selling as the firm was able. It seems he has made good on that promise.
On May 21, shares of Palantir traded around $20.75 for a market cap of $38.94 billion. Since the stock's IPO in September of 2020, the stock has gained 118%.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 1 out of 10. Following a successful IPO and other funding initiatives, the cash-debt ratio is high at 5.17 while the Altman Z-Score is 16.66. The operating margin of -33.41% and net margin of -36.18% show the company is still far from being profitable.
Liberty Broadband
The firm curbed its Liberty Broadband (LBRDK, Financial) stake by 1,078,917 shares, or 20.43%, leaving a remaining holding of 4,202,850 shares. The trade had a -3.68% impact on the equity portfolio. Shares traded for an average price of $151.32 during the quarter.
Liberty Broadband is a holding company for two subsidiaries, Charter Communications and TruePosition, that operate in the cable, broadband and mobile location technology businesses. The company's headquarters is in Englewood, Colorado.
On May 21, shares of Liberty Broadband traded around $164.25 for a market cap of $30.97 billion and a price-earnings ratio of 64.51. According to the Peter Lynch chart, the stock is trading above its intrinsic value, but near its median historical valuation.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 3 out of 10. The cash-debt ratio of 0.25 is below 75% of competitors, but the Piotroski F-Score of 4 out of 9 suggests the company is financially stable. The return on equity of 3.29% and return on assets of 2.36% are both higher than the industry medians.
Portfolio overview
At the end of the quarter, Soros Fund Management held shares of 194 stocks in an equity portfolio valued at $4.68 billion. The firm established 120 new positions, sold out of 31 stocks and added to or reduced several other positions for a turnover of 28%.
The top holdings were Liberty Broadband with 13.50% of the equity portfolio, D.R. Horton Inc. (DHI, Financial) with 8.40% and the PowerShares QQQ Trust Ser 1 ETF (QQQ, Financial) with 7.55%. In terms of sector weighting, the firm was most invested in communication services, consumer cyclical and financial services.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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